Electronic Data Systems, the No. 2 U.S. technology services provider, on Sunday said it has agreed to sell a software development unit to three buyout firms for $2.05 billion in cash as part of a plan to sell assets that are not part of its primary business.
Under the terms of the deal, Plano, Texas-based EDS will sell its UGS PLM Solutions division to Bain Capital, Silver Lake Partners and Warburg Pincus. The three funds will each hold an equal stake in the unit.
The purchase, expected to close within 90 days, represents the largest-ever investment by private equity firms in a technology company, with the purchase price about 2.3 times the unit's annual revenue, according to EDS.
Warburg Pincus Vice Chairman Bill Janeway told Reuters the deal was attractive because UGS PLM is an established company that generates cash and has customers ranging from General Motors Corp. to Boeing Co. At the same time, its revenue is increasing at a rate of 15 percent to 20 percent.
Last October, EDS said it would sell the business through an initial public offering or private sale. The deal moves the company closer to its goal of zero net debt -- total debt minus cash and marketable securities on hand -- by the end of 2004, it said in a statement.
"While UGS PLM Solutions is an excellent business and has been a solid contributor to EDS, its business is clearly outside of our core focus," EDS Chief Financial Officer Bob Swan said in a press release.
"As a result, we're essentially divesting a non-core, non-strategic operation."
UGS PLM Solutions generated $897 million in revenue and $104 million in net income in 2003.
Shares of EDS closed Friday at $19.15, up 32 cents or 1.7 percent, on the New York Stock Exchange.